SkyWest, Inc. Announces Second Quarter 2018 Profit

Net income of $76 million, or $1.43 per diluted share, up from $50 million or $0.95 per diluted share in Q2 2017

Pre-tax income of $98 million, up 21% from $81 million in Q2 2017

New agreement to operate 20 new CRJ900s for Delta Air Lines under a nine-year term, replacing 20 CRJ700s expiring from contract

New agreement to place 20 used CRJ700s with American Airlines under a four-year term

Three-year extension on 19 CRJ700s scheduled to expire in 2019/2020 with United Airlines

New agreement to place 20 internally-sourced CRJ200s under a three-year contract with United

SkyWest, Inc. (NASDAQ: SKYW) (“SkyWest”) today reported financial and operating results for Q2 2018, including net income of $76 million, or $1.43 per diluted share, compared to net income of $50 million, or $0.95 per diluted share for Q2 2017. Q2 2018 pre-tax income of $98 million increased 21% from Q2 2017 and was primarily due to SkyWest’s ongoing fleet transition. Since Q2 2017, SkyWest added 23 new E175 aircraft and removed 34 CRJ700/CRJ900 aircraft and 32 CRJ200/ERJ145 aircraft.

Commenting on the results, Chip Childs, Chief Executive Officer and President of SkyWest, said “We are focused on remaining disciplined in our execution of fleet solutions that meet the needs of our customers. The agreements and extensions announced this quarter are expected to continue to improve our fleet mix in alignment with our overall fleet transition strategy. I appreciate the dedicated service our professionals consistently provide to our customers.”

Flying Agreement AnnouncementsDelta:

SkyWest Airlines, Inc. (“SkyWest Airlines”) reached an agreement with Delta Air Lines (“Delta”) to operate 20 new Bombardier CRJ900 aircraft under a nine-year flying contract. The aircraft will be acquired by Delta under a previously announced agreement with Bombardier and operated by SkyWest Airlines. SkyWest Airlines anticipates placing the 20 CRJ900s into service beginning late 2018 through 2020. These aircraft will have the ATMOSPH�RE cabin with a 70-seat, dual-class configuration and will replace 20 CRJ700s scheduled to expire under SkyWest’s flying contracts with Delta.

American:

SkyWest Airlines reached an agreement with American Airlines (“American”) to place 20 used CRJ700s under a four-year contract. The 20 CRJ700s are expected to be sourced from within SkyWest’s fleet. The first aircraft in this agreement was placed into service in June 2018 and all 20 aircraft are scheduled to be in service by early 2019.

United:

SkyWest Airlines reached an agreement with United Airlines (“United”) to extend their existing flying contract on 19 CRJ700s operated by SkyWest Airlines. These aircraft previously had contract expirations scheduled for mid-2019/2020 and were extended for three years.

Separately, ExpressJet Airlines, Inc. (“ExpressJet”) reached an agreement with United to a three-year contract for 20 used CRJ200s. The 20 CRJ200s are expected to be sourced from within SkyWest’s fleet through contract expirations with other partners scheduled for the second half of 2018. The 20 CRJ200s are expected to be placed into service with United between the latter part of 2018 and early 2019.

Financial HighlightsRevenue was $806 million in Q2 2018, up from $792 million in Q2 2017. The increase in revenue included the net impact of adding 23 new E175 aircraft and other economic improvements within SkyWest’s fleet mix since Q2 2017, partially offset by the removal of unprofitable or less-profitable aircraft over the same period.

Operating expenses were $679 million in Q2 2018, down from $685 million in Q2 2017. The decrease in operating expenses was primarily due to the reduction in direct operating costs with the net removal of 43 aircraft from service.

The effective tax rate for Q2 2018 was 23% compared to 38% in Q2 2017. The lower tax rate in Q2 2018 was primarily due to the reduced federal rate under the new tax law enacted in Q4 2017.

Operational Update SkyWest Airlines took delivery of 14 new E175/E175 SC aircraft during Q2 2018. The following summarizes the anticipated delivery dates for three E175 aircraft to be placed under contract with Alaska Airlines and 17 E175 SC aircraft to be placed under contract with Delta for the second half of 2018:

In-service

Scheduled E175/E175 SC

aircraft deliveries

Anticipatedin-service

June 30, 2018

Q3 2018

Q4 2018

Dec 31, 2018

Total E175/E175 SCs:

126

15

5

146

ExpressJet continued the previously-announced wind down of its flying agreement with Delta during the quarter. At the end of Q2 2018, ExpressJet had 22 CRJ700s remaining in service under the Delta agreement. ExpressJet continues to engage in discussions around the CRJ700s scheduled to come out of service with Delta later this year and remains positive with alternative opportunities to utilize these CRJ700 aircraft.

ExpressJet anticipates its flying contract with American for 12 CRJ700s scheduled to terminate in early 2019 will not be extended. These aircraft are expected to be returned to the lessors following removal of service with American.

SkyWest had $649 million in cash and marketable securities at June 30, 2018, slightly up from March 31, 2018. During the second quarter of 2018, SkyWest:

Used $50 million toward the purchase of 14 E175 aircraft

Used $35 million for other capital investments, including spare engines and aircraft parts

Total debt at June 30, 2018 was $3.0 billion, up $193 million from March 31, 2018, which included debt issued for 14 E175 aircraft acquired during the quarter, partially offset by scheduled principal payments.

About SkyWest

Based in St. George, Utah, SkyWest, Inc. is the holding company for two scheduled passenger airline operations and an aircraft leasing company with more than 17,000 employees. SkyWest’s airline companies provide commercial air service in cities throughout North America with nearly 3,000 daily flights carrying approximately 50 million passengers annually. SkyWest’s airline companies operate through partnerships with United Airlines, Delta Air Lines, American Airlines and Alaska Airlines.

SkyWest will host its conference call to discuss second quarter 2018 results today, July 26, 2018, at 2:30 p.m. Mountain Time. The conference call number is 1-877-418-5293 for domestic callers, 1-866-605-3852 for Canada callers and 1-412-717-9593 for other international callers. Please call up to ten minutes in advance to ensure you are connected prior to the start of the call. The conference call will also be available live on the Internet at https://www.webcaster4.com/Webcast/Page/1088/26425. This press release and additional information regarding SkyWest, including access information for the digital rebroadcast of the second quarter 2018 earnings call, participation at investor conferences, investor presentations and monthly traffic statistic releases, can be accessed at inc.skywest.com.

Forward Looking-Statements

In addition to historical information, this release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “forecasts”, “expects,” “intends,” “believes,” “anticipates,” “estimates”, “should,” “likely” and similar expressions identify forward-looking statements. Such statements include, but are not limited to, statements about the continued demand for our product, the wind-down of ExpressJet’s flying agreement with Delta, and the related removal from service and/or placement into service of certain aircraft, the scheduled aircraft deliveries for SkyWest Airlines for 2018, as well as SkyWest’s future financial and operating results, plans, objectives, expectations, estimates, intentions and outlook, and other statements that are not historical facts. All forward-looking statements included in this release are made as of the date hereof and are based on information available to SkyWest as of such date. SkyWest assumes no obligation to update any forward-looking statement. Readers should note that many factors could affect the future operating and financial results of SkyWest, SkyWest Airlines or ExpressJet, and could cause actual results to vary materially from those expressed in forward-looking statements set forth in this release. These factors include, but are not limited to, the prospects of entering into agreements with existing or other carriers to fly new aircraft, ongoing negotiations between SkyWest, SkyWest Airlines and ExpressJet and their major partners regarding their contractual obligations, uncertainties regarding operation of new aircraft, the ability to attract and retain qualified pilots, the impact of regulatory issues such as pilot rest rules and qualification requirements, and the ability to obtain aircraft financing.

Actual operational and financial results of SkyWest, SkyWest Airlines and ExpressJet will likely also vary, and may vary materially, from those anticipated, estimated, projected or expected for a number of other reasons, including, in addition to those identified above: the challenges and costs of integrating operations and realizing anticipated synergies and other benefits from the acquisition of ExpressJet; the challenges of competing successfully in a highly competitive and rapidly changing industry; developments associated with fluctuations in the economy and the demand for air travel; the financial stability of SkyWest’s major partners and any potential impact of their financial condition on the operations of SkyWest, SkyWest Airlines, or ExpressJet; fluctuations in flight schedules, which are determined by the major partners for whom SkyWest’s operating airlines conduct flight operations; variations in market and economic conditions; significant aircraft lease and debt commitments; residual aircraft values and related impairment charges; labor relations and costs; the impact of global instability; rapidly fluctuating fuel costs, and potential fuel shortages; the impact of weather-related or other natural disasters on air travel and airline costs; aircraft deliveries; the ability to attract and retain qualified pilots and other unanticipated factors. Risk factors, cautionary statements and other conditions which could cause SkyWest’s actual results to differ materially from management’s current expectations are contained in SkyWest’s filings with the Securities and Exchange Commission, including its most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.

SkyWest, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Dollars and Shares in Thousands, Except per Share Amounts)

(Unaudited)

Three Months Ended

June 30

Six Months Ended

June 30

2018

2017

2018

2017

OPERATING REVENUES

Flying agreements

$ 793,637

$ 781,724

$ 1,561,602

$ 1,516,253

Airport customer service and other

11,878

9,788

27,313

22,425

Total operating revenues

$ 805,515

$ 791,512

$ 1,588,915

$ 1,538,678

OPERATING EXPENSES

Salaries, wages and benefits

$ 293,677

$ 294,795

$ 600,396

$ 592,462

Aircraft maintenance, materials and repairs

139,774

152,356

281,380

284,681

Depreciation and amortization

82,714

71,206

160,298

141,320

Aircraft rentals

37,508

55,413

82,188

113,123

Aircraft fuel

30,011

20,071

56,950

38,504

Airport-related expenses

25,890

28,949

55,197

60,897

Other operating expenses

69,263

62,126

137,653

124,801

Total operating expenses

$ 678,837

$ 684,916

$ 1,374,062

$ 1,355,788

OPERATING INCOME

$ 126,678

$ 106,596

$ 214,853

$ 182,890

OTHER INCOME (EXPENSE)

Interest income

$ 1,705

$ 1,330

$ 3,409

$ 1,990

Interest expense

(28,811)

(27,063)

(55,045)

(51,612)

Other income (loss), net

(1,245)

–

2,313

–

Total other expense, net

$ (28,351)

$ (25,733)

$ (49,323)

$ (49,622)

INCOME BEFORE INCOME TAXES

$ 98,327

$ 80,863

$ 165,530

$ 133,268

PROVISION FOR INCOME TAXES

22,468

30,386

35,310

48,005

NET INCOME

$ 75,859

$ 50,477

$ 130,220

$ 85,263

BASIC EARNINGS PER SHARE

$ 1.46

$ 0.98

$ 2.51

$ 1.65

DILUTED EARNINGS PER SHARE

$ 1.43

$ 0.95

$ 2.46

$ 1.61

Weighted average common shares

Basic

52,046

51,751

51,983

51,785

Diluted

52,913

52,977

52,973

53,090

SkyWest, Inc. and Subsidiaries

Summary of Consolidated Balance Sheets

(Dollars in Thousands)

(Unaudited)

June 30,

2018

December 31,

2017

Cash and marketable securities

$ 649,090

$ 685,295

Other current assets

326,135

309,838

Total current assets

$ 975,225

$ 995,133

Property and equipment, net

4,610,204

4,134,003

Deposit on aircraft

49,000

49,000

Other long-term assets

278,664

296,264

Total assets

$ 5,913,093

$ 5,474,400

Current portion, long-term debt

$ 353,743

$ 309,678

Other current liabilities

524,852

511,147

Total current liabilities

$ 878,595

$ 820,825

Long-term debt, net of current maturities

2,615,637

2,377,346

Other long-term liabilities

558,209

521,907

Stockholders’ equity

1,860,652

1,754,322

Total liabilities and stockholders’ equity

$ 5,913,093

$ 5,474,400

Unaudited Operating Highlights

Three Months Ended

June 30,

Six Months Ended

June 30,

2018

2017

Change

2018

2017

Change

Block hours

439,174

467,100

(6.0)%

875,541

919,783

(4.8)%

Departures

255,561

280,326

(8.8)%

503,688

544,188

(7.4)%

Passengers carried

12,339,631

13,364,974

(7.7)%

23,659,861

25,385,351

(6.8)%

Passenger load factor

81.9%

81.8%

0.1 pts

79.7%

80.3%

(0.6) pts

Average passenger trip length

522

511

2.2%

523

515

1.6%

SkyWest, Inc. and Subsidiaries

Additional Operational Information (unaudited)

SkyWest’s total fleet in service increased by three aircraft during Q2 2018, as follows:

Aircraft in scheduled service at March 31, 2018:

580

Additions:

New E175/E175 SC aircraft:

14

Removals, net:

CRJ900 aircraft:

(6)

CRJ700 aircraft:

(4)

CRJ200 aircraft:

(1)

Total net removals:

(11)

Aircraft in scheduled service at June 30, 2018:

583

SkyWest’s total fleet in service decreased by 43 aircraft over the last twelve months, as follows:

Aircraft in scheduled service at June 30, 2017:

626

Additions:

New E175/E175 SC aircraft:

23

Removals, net:

CRJ900 aircraft:

(28)

CRJ700 aircraft:

(6)

ERJ145/135 aircraft:

(24)

CRJ200 aircraft:

(8)

Total net removals:

(66)

Aircraft in scheduled service at June 30, 2018:

583

SkyWest, Inc. and Subsidiaries

Additional Operational Information (continued and unaudited)

Completed Block Hours by Aircraft Type and by Airline

Three months ended June 30

Six months ended June 30

By Aircraft Type:

2018

2017

Variance%

2018

2017

Variance%

E175s

109,383

90,051

21.5%

208,975

169,979

22.9%

CRJ700/900s

122,930

145,565

(15.5)%

251,745

282,426

(10.9)%

Dual-class aircraft

232,313

235,616

(1.4)%

460,720

452,405

1.8%

CRJ200s

139,768

137,477

1.7%

274,777

270,751

1.5%

ERJ145/135s

67,093

94,007

(28.6)%

140,044

196,627

(28.8)%

50-seat aircraft

206,861

231,484

(10.6)%

414,821

467,378

(11.2)%

Total Block Hours

439,174

467,100

(6.0)%

875,541

919,783

(4.8)%

Three months ended June 30

Six months ended June 30

By Airline:

2018

2017

Variance%

2018

2017

Variance%

SkyWest Airlines

344,284

303,921

13.3%

673,228

581,756

15.7%

ExpressJet

94,890

163,179

(41.8)%

202,313

338,027

(40.1)%

Total Block Hours

439,174

467,100

(6.0)%

875,541

919,783

(4.8)%

Quarterly Fleet and Block Hour Production Forecast for 2018

As of

12/31/2017

As of

3/31/2018

As of6/30/2018

As of

9/30/2018

As of12/31/2018

Fleet (1):

(Actual)

(Actual)

(Actual)

(Estimate)

(Estimate)

E175/175SCs

107

112

126

141

146

CRJ700/900s

181

169

159

150

142

CRJ200s

195

199

198

197

197

ERJ145s/135s

112

100

100

100

100

Totals

595

580

583

588

585

Q4-2017

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Total 2018

Production (2):

(Actual)

(Actual)

(Actual)

(Estimate)

(Estimate)

(Estimate)

Block Hours

450,095

436,367

439,174

445,000

432,000

1,752,000

(1) Fleet count excludes aircraft removed from scheduled service. Actual fleet counts may vary from the forecast due to timing of aircraft removed from service, timing of aircraft transitioned into service and timing of new aircraft deliveries.

(2) Actual production may vary from estimates for various reasons including, but not limited to, timing of aircraft removals and deliveries and anticipated flight completion rates. SkyWest has discontinued providing ASM forecasts, as ASMs are not a meaningful metric in SkyWest’s capacity purchase agreements.

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